German gas import costs surge 153% in H1 as imports drop 24%

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Russia has cut flows through Nord Stream 1, the major gas delivery route to Europe via Germany, to a fifth of its capacity. Reuters

German natural gas import costs rose by 153% in the first six months of 2022 from a year earlier, even though imports were down by 24.3%, official data showed.

Europe’s biggest economy mainly imports gas from Russia, Norway, the Netherlands, Britain and Denmark, but has turned more to liquefied natural gas (LNG) since the Ukraine crisis.

The June statistics from Germany’s foreign trade office are the fourth to reflect the impact of Russia’s invasion of Ukraine, which began on Feb. 24, and Western sanctions against what the Kremlin calls a “special military operation”.

Russia has cut flows through Nord Stream 1, the major gas delivery route to Europe via Germany, to a fifth of its capacity, forcing importers and governments to scramble for substitutes before the heating season from October.

Gas, power and carbon traders monitor gas imports because the supply and demand balance affects prices and traded volumes in all three markets.

Gas data also correlates with coal, which competes in the production of electricity, while also giving clues about demand for mandatory European Union carbon emissions permits.

German foreign trade office BAFA’s monthly statistics, which are published with a roughly two-month delay, showed January-June imports at 2,023,691 terajoules (TJ), or 57.5 billion cubic metres (bcm), compared with 2,671,691 TJ a year earlier.

As supply disruptions propelled gas prices to record highs, Germany’s import bill increased to 30.8 billion euros ($31.20 billion) in the six month period, compared with 12.2 billion euros in the same period of 2021, BAFA data showed.

The average price paid on the border during January to June was up 234% year on year at 15,243.71 euros/TJ, BAFA said.

The June alone price of 17,594.31 euros, equivalent to 6.33 cents per kilowatt hour (kWh), was more than three times that of June 2021.

German gas inventories are at 77.8% of available storage capacity, European gas infrastructure group GIE’s website showed. This compared with 55.1% a year ago.

Separately, a charge to fund gas imports into Germany to boost national stocks has been set at 0.59 euro per megawatt hour (MWh), gas market operator Trading Hub Europe said on Thursday, feeding into a sharp rise in consumer energy costs. The gas storage levy, set to kick in from Oct. 1, comes on top of another levy on end-consumers designed to distribute the cost of replacing Russian gas to utilities like Uniper .

This will already cost an average family of four an additional annual 480 euros ($488), according to price platform Verivox’ assessment, while Thursday’s charge will add an additional 13 euros, a spokesperson for competitor Check24 said.

However, to cushion the blow to consumers, Chancellor Olaf Scholz said sales tax on gas would be reduced to 7% from 19%.

The levies are part of a new energy security law Germany drew up this year in response to a drop in gas exports from Russia, which has become embroiled in an energy stand-off with the West since Moscow’s invasion of Ukraine in February.

The new law obliges Germany’s gas market operator THE to tender for additional gas purchases on top of regular ones it carries out to balance supply and demand, and potentially to buy outright on the open market, sidestepping its usual tender process, if necessary to top up reserves.

The cost of the measures is initially charged to gas suppliers on the pipeline grid. That cost is then rolled over, under a supervised mechanism, all the way to end customers.

Customers must by law be notified of the levy six weeks before the proposed Oct. 1 start date.

The storage levy, which will remain in place until April 2025, will be first calculated in the fourth quarter of 2022 and then every six months after that.

Economists have warned that the two new levies will further accelerate inflation in Europe’s largest economy.

Scholz, who has promised to help households cope with higher gas bills, announced a reduction in sales tax while the levies are in place.

“With this step we are reducing the burden on consumers more than we are adding to it with the charge,” said Scholz, without giving any figures. He added that he expected companies to pass on the reduction to consumers.

Check24 said that a household consuming 20,000 kilowatt hours (kWh) and paying 3,717 euros per annum would be saving 375 euros by the cut of VAT to 7% from 19%.

The move would cost the state about 10 billion euros through March 2024, a government official said.

The BDEW power industry association welcomed the step, saying it could dampen a massive price rise but some economists warned that it was too little and that it was a blunt tool which would not help poorer households much.

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